Forex Walkthrough

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Introduction - Making And Losing Money

How People Make or Lose Money Doing It:
By converting your money into a different currency, you are hoping that the new currency increases in value. When you convert back to your initial currency, ideally you will have more money than you started with.

Let's take a look at a simple example of how someone can make money from a forex transaction. Suppose you have $900 U.S. dollars and you exchange that for $1000 Canadian dollars. One week later, the CAD/USD exchange rate goes up from 0.90 to 1.0, so the Canadian dolar which you own has increased in value compared to the U.S. dollar. You could then exchange the $1000 CAD you have back into U.S. dollars and you would receive $1000 USD.

So you started with $900 USD, you now have $1000 USD, a profit of $100 USD.

Your Decision CAD USD
You buy 1,000 CAD at the
CAD/USD rate of 0.90
+1000 -900
A week later, the CAD/USD rises to 1.00 and you exchange your 1,000 CAD back into U.S. dollars -1000 +1000
Profit +100
Buying And Selling


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RELATED TERMS
  1. CAD

    What currency is CAD? CAD is the currency abbreviation or currency ...
  2. CAD (Canadian Dollar)

    The currency abbreviation or currency symbol for the Canadian ...
  3. Cross Currency

    A pair of currencies traded in forex that does not include the ...
  4. Reciprocal Currency

    In the foreign exchange market, a currency pair that involves ...
  5. Base Currency

    The first currency quoted in a currency pair on forex. It is ...
  6. Dollar Rate

    The exchange rate of a currency against the U.S. dollar (USD). ...
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